Giving such control back to utilities “means the customers would be stuck holding the bag for any bad decisions and mismanagement,” said Ryan Augsburger, president of the Ohio Manufacturers’ Association. That, in turn, would interfere with competition. “You’re interfering with the market.”
A guaranteed market
The draft bill obtained by Canary Media would let utilities “construct, own, and operate” nuclear generation and include a facility in its rate base for the plant’s full life, with “all prudently incurred costs … reflected in the utility’s distribution rates.”
To qualify for approval, draft bill language says utilities would need one or more customers, such as data centers, to agree to a “retail participation agreement” for at least 20 years to buy a nuclear plant’s electricity. Payments under the agreement would offset the cost of building the facility, and the customer base at large shouldn’t have to pay.
But after that 20-year period, the broader customer base could be on the hook. That’s because a utility would be guaranteed sales from the facility, even if its electricity is more expensive than other options on the market. The bill could allow a utility to shift the costs of decommissioning the nuclear facilities to customers, too.
“I’m leery of these 20-year deals,” said Dennis Wamsted, an energy analyst at the Institute for Energy Economics and Financial Analysis, who noted that there are many risks. Companies entering into agreements with the utility might not be around that long. Or they might be subsidiaries or joint ventures with limited assets, as is the case for many oil and gas drilling projects.
Just as important, technology doesn’t stand still. On the demand side, data centers could become more energy efficient as artificial intelligence techniques are refined, thus needing less electricity. As for supply, solar and wind and batteries are likely to keep getting cheaper over time.
From Wamsted’s perspective, renewables are a much better choice for addressing growing power demands.
“You can build these things today … You can bring them online in two years, maybe three years,” Wamsted said — and “they’re competitive.”
The bill has clear support from American Electric Power, which owns Ohio Power Co., the largest single utility in the state.
The version of the draft bill obtained by Canary Media includes the name Levi Gross as part of the document title. Gross is a registered lobbyist for AEP.
AEP spokesperson Scott Blake did not answer Canary Media’s questions about why all customers should be on the hook after those agreements run out, or why one of the most expensive types of electricity should be included in utilities’ rate bases.
“For more than 20 years, Ohio has retired more power plants than it has added, resulting in an energy supply shortage that is driving up energy prices for all Ohioans,” Blake said in a prepared statement. “New nuclear power solutions offer Ohio the steady, around-the-clock energy supply that is needed to support this unprecedented demand growth and stabilize energy prices.”
The suggestion that building unproven SMRs would “stabilize energy prices” also drew skepticism from critics.
The bill’s supporters argue that SMRs will fall in price as more and more are constructed, but for now that theory is unsupported by evidence.
“There will need to be a lot of small modular reactors … to bring that cost down to be even close to competitive,” said John Seryak, lead analyst at the consulting firm RunnerStone, who regularly provides advice on energy issues for the Ohio Manufacturers’ Association.
The draft bill’s language also suggests there could be commingling of expenses and revenue streams for the utilities, which raises the risks for shifting more costs to ratepayers in general, Seryak said. “We come back to the best place: You just don’t do it from the start.”
Mathews said discussions are ongoing, so the version of the bill that will eventually be introduced will likely differ from the draft. But even with changes, Rader and other critics feel the proposal would be a big step backward.
“This is not a bill to protect customers,” Augsburger said. “This is a bill to give the utility a new line of revenue and profitability.”